Who would have thought that in the age of algorithmic trading, where computers trade with other computers, there would be so much interest in chat tools for human traders to communicate, share information and negotiate trades. Nevertheless, with regulators and industry participants concerned about the opacity of chat tools and their potential for illicit information sharing and rate-fixing, two of the most interesting projects underway in the financial data world are chat-related.
Markit’s Collaboration Services initiative, with its directory, network and integration tools, is already underway, and is now allowing users to create chat rooms with greater controls and scrutiny of who participates and what they say. And in one of this year’s worst-kept secrets, Goldman Sachs and a consortium of 13 other firms have acquired Palo Alto-based messaging startup Perzo to create Symphony, an open messaging tool with more stringent compliance controls.
Cynics might say that a bank-owned messaging platform may not be the best solution to chat room and messaging abuse that allowed traders to manipulate benchmark rates, though we should point out that banks have more to lose in fines and reputational damage than an unscrupulous trader stands to gain by colluding on a trade. So, if anything, banks should be looking for solutions that go above and beyond current compliance requirements. And both Symphony’s and Markit’s platforms offer this in spades: Markit’s new chat room feature allows firms to specify who can join groups and conversations, and requires participants to use their real name as recorded in its federated Directory of participants, while Symphony features similar active controls and monitoring—even to the extent of being able to not just remove a comment that violates policies, but to identify and isolate those participants that saw it, leaving the other participants to carry on uninterrupted.
Traders who violate messaging policies aren’t the only ones potentially being isolated. Bloomberg—which inadvertently contributed to the current messaging buzz when it was revealed that some of its journalists had been able to monitor some client activity on their Bloomberg terminals—stands to lose out if this combination of new bank-backed (i.e. incentivized) messaging client and federated network can gain sufficient traction to pry users away from Bloomberg’s proprietary messaging tool, and perhaps ultimately their Bloomberg terminals altogether.
Though that seems unlikely, the message, loud and clear, appears to be that industry participants are ready for something new: a disruptive model that will break the ties that bind them to one particular data platform because of its association with a proprietary communication network. In fact, if you look at these federated messaging platforms as a kind of abstraction layer between different content networks and front-end interfaces, then you could argue that the messaging space is achieving what market participants also want from market data platforms—insofar as certain platforms have become so enmeshed with firms’ operations that they cannot easily be removed, making it an expensive proposition to replace these with something that might prove better or cheaper in the long run, or which would allow users to create truly best-of-breed solutions.
However, there are signs of competition in this space—a prerequisite for this kind of discussion. For example, Chicago-based data vendor Barchart is touting a new “Enterprise Data Management” managed infrastructure service for acquiring, processing and distributing market data. Though aimed primarily at data providers seeking a new way to bring content to market, officials say the service could also appeal to user firms handling large amounts of market data.
Could this pry some firms away from incumbent platforms—or even prompt the platform vendors to make it easier to integrate content and services? The building blocks are now in place: all that’s needed is the same loud and clear will as is being demonstrated in messaging.
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